Commission Document

Verizon v. FCC, No. 11-1355 (D.C. Cir.)

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ORAL ARGUMENT NOT YET SCHEDULED
USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 1 of 122
BRIEF FOR APPELLEE/RESPONDENTS
IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

3. Related cases.
Verizon claims (Br. xii-xiii) that Cellco P’ship v. FCC, No. 11-1135, is
related; MetroPCS (Br. xiii) disagrees. The Cellco case presents some legal
issues similar to those presented here, but it involves entirely different factual
and regulatory circumstances. The Court’s decision in either case does not
control the outcome of the other one.

In the order on review, Preserving the Open Internet, 25 FCC Rcd
17905 (2010) (Order), the Commission promulgated high-level rules to
ensure that consumers retain the ability to access Internet sites of their
choosing. The questions presented are:
1) Whether the Commission properly determined that it had statutory
authority to adopt the Open Internet Rules;
2) Whether the Commission properly determined that the Open
Internet Rules do not impose common-carriage obligations on
broadband Internet access service providers;
3) Whether the rules are consistent with the First and Fifth
Amendments; and
4) Whether the rules are supported by substantial evidence.

STATUTES AND REGULATIONS

Pertinent materials are included in the appendix.

INTRODUCTION

The Internet was designed and developed as an open network in which
a user can go to any website and use any application without his access
provider acting as a gatekeeper. By the same token, “edge providers” – the
2 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 16 of 122
providers of content, applications, and services, such as Amazon, Twitter,
Netflix, or the Wall Street Journal – may be reached by any end user without
permission from the end user’s access provider.
Openness has been essential to the Internet’s extraordinary success. By
keeping barriers to entry low, openness enables anyone – from large
corporations, to start-up companies, to college students – to create innovative
applications. The resulting explosion of services has increased the Internet’s
usefulness in ways that have made it central to modern communications. As
more services and applications have become available, especially ones like
video delivery and cloud storage that require the transmission of voluminous
data, consumer demand for high-speed Internet access has grown
significantly. That demand has driven investment in Internet networks that
enable consumers to use the latest innovations.
Prior to the Order under review, however, there were significant threats
to openness, and thus to the engine that has driven investment in broadband
facilities. Several broadband access providers had blocked or degraded
service. Other providers have the technological capacity and the economic
incentive to engage in similar acts. And with the majority of Americans
having only two wireline broadband choices (many have only one), market
discipline alone could not guarantee continued openness.
3 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 17 of 122
The Commission responded to these threats by adopting modest, high-
level rules – in large measure continuations of longstanding, bipartisan FCC
policies – that preserve Internet openness and its concomitant incentives for
innovation and investment. The rules prohibit blocking of access to lawful
Internet content, prevent unreasonable discrimination (but not measures
required to protect or manage the network), and require disclosure of key
information.
These sensible rules of the road fulfill specific statutory directives to
advance broadband investment and to ensure that wireless licensees act in the
public interest. They follow from decades of prior practice regarding access
to the Internet and its precursors.
The rules have been accepted by access providers, edge providers,
investors, and consumer groups. Even Verizon has expressed the belief that
it is “essential” that the “Internet remains an unrestricted and open platform,
where people can access the lawful content, services, and applications of their
1
choice.”
Of the entire Internet industry, Verizon and MetroPCS alone challenge
the rules. As we show below, their challenges are baseless.

Congress vested the FCC with authority over “all interstate and foreign
communication by wire or radio.” 47 U.S.C. § 152(a). Congress intended
the Commission to be the country’s “centraliz[ed] authority” for
communications policy. 47 U.S.C. § 151; see United States v. Southwestern Cable Co., 392 U.S. 157, 168 (1968).
Similarly, to “maintain the control of the United States over all the
channels of radio transmission,” 47 U.S.C. § 301, Congress allowed the
Commission to grant licenses to use radio spectrum insofar as doing so would
serve the “public convenience, interest, or necessity,” 47 U.S.C. § 307(a).
The authority granted by Congress was intentionally designed to
accommodate “the dynamic aspects” of communications technology. FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138 (1940).
The Commission has long exercised authority over computer-based
networks to implement policies governing access to the Internet and its
precursors. In the early 1980s, the Commission adopted the “Computer”
regime to ensure that wireline communications platforms were made
available on equal terms to all companies seeking to provide service. See Second Computer Inquiry, 77 FCC 2d 384 (1980), aff’dCCIA v. FCC, 693
5 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 19 of 122
F.2d 198 (D.C. Cir. 1982); see NCTA v. Brand X Internet Services, 545 U.S.
967, 976-977 (2005).
In the Telecommunications Act of 1996, Congress granted the FCC a
central role in making and implementing federal policy regarding the Internet.
Congress left to the Commission’s discretion the fundamental policy decision
whether to classify broadband access as a “telecommunications service”
subject to the common carrier provisions of Title II of the Communications
Act or as an “information service” not subject to Title II. See 47 U.S.C.
§ 153(24), (53); Brand X, 545 U.S. at 976-977.
Furthermore, in Section 706(a) of the Telecommunications Act of
1996, Congress directed the Commission to “encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability to all
Americans” by using “measures that promote competition in the local
telecommunications market” and “other regulating methods that remove
barriers to infrastructure investment.” 47 U.S.C. § 1302(a) (hereafter, Section
706(a)). Section 706(b), moreover, directs the Commission to determine
periodically if broadband “is being deployed to all Americans in a reasonable
and timely fashion.” 47 U.S.C. § 1302(b) (hereinafter Section 706(b)). If the
Commission determines that “reasonable and timely” deployment is not
occurring, the Commission “shall take immediate action to accelerate
6 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 20 of 122
deployment of such capability by removing barriers to infrastructure
investment and by promoting competition in the telecommunications
market.” Ibid.(emphasis added). Congress also declared it to be “the policy
of the United States” to promote “technologies which maximize user control
over what information is received” over the Internet, and to “preserve the
vibrant and competitive free market that presently exists for the Internet.” 47
U.S.C. § 230(b)(2) & (3).
In 1998, the Commission decided that Internet access service provided
over existing wires by telephone companies (digital subscriber line or DSL
service) included elements of both telecommunications and information
services. Advanced Services Order, 13 FCC Rcd 24012, 24029-24031
(1998). DSL service thus was subject to regulation under both the common
carrier provisions of Title II (to the degree it involved transmission of
information) and the Computer regime (to the degree it involved processing
of information).
In 2002, the Commission classified cable modem service as
exclusively an “information service” under Title I of the Act. See Cable Modem Order, 17 FCC Rcd 4798 (2002), aff’d, Brand X, 545 U.S. 967.
Ultimately, the Commission classified all residential broadband, including
DSL, as exclusively “information services.” Wireline Broadband Order, 20
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FCC Rcd 14853 (2005); Wireless Broadband Order, 22 FCC Rcd 5901
(2007).
The Commission’s decisions not to apply Title II common carrier
regulation to wireline broadband access service were grounded in the
understanding that it retained authority to set policy for broadband Internet
access service, including any necessary “consumer protection, network
reliability, or national security obligation.” WirelineBroadband, 20 FCC
Rcd at 14914; see also Cable Modem Order, 17 FCC Rcd at 4844 (expressing
concern over the “threat that subscriber access to internet content or service
could be blocked or impaired”). Then-Chairman Powell explained that the Cable Modem Order did not leave the Commission “powerless to protect the
public interest,” but that the Commission retained “ample authority under
Title I.” Id.,17 FCC Rcd at 4867. Verizon expressed the same
understanding, informing the Commission in the DSL reclassification
proceeding that classification of broadband as an information service would
not preclude regulation, but would “allow the Commission to write on a clean
regulatory slate” and to impose “those regulations that are truly necessary in
the public interest.” Verizon Comments, CC Docket No. 02-33, at 18 (filed
May 3, 2002) (http://apps.fcc.gov/ecfs/document/view?id=6513190589)
(“Verizon 02-33 Comments”).
8 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 22 of 122
Affirming the Commission’s classification regime, the Supreme Court
likewise determined that, although under the Commission’s decisions,
“information-service providers … are not subject to mandatory common-
carrier regulation,” “the Commission remains free to impose special
regulatory duties on” broadband providers. Brand X, 545 U.S. at 976, 996.
Under this regime, the Commission consistently has acted to protect
Internet openness. On the same day it reclassified DSL as an information
service, the Commission unanimously issued an Internet Policy Statement, 20
FCC Rcd 14986 (2005), explaining that consumers of Internet access service
are entitled, among other things, to “access the lawful Internet content of their
choice” and “run applications and use services of their choice.” Id. at 14987-
14988. The Commission likewise has conditioned spectrum licenses on the
requirement that the licensee maintain an “open platform” similar to Open
Internet protections. 700 MHz Order, 22 FCC Rcd 15289 (2007).
The Commission has also used enforcement proceedings to protect
openness. When Madison River, a telephone-based broadband provider, was
alleged to have interfered with competing Internet-based voice services, the
Commission entered into a consent decree to stop the interference. Madison River Communications, 20 FCC Rcd 4295 (2005). When Comcast, a cable-
based broadband provider, interfered with its subscribers’ use of a file-
9 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 23 of 122
sharing application, the Commission declared that Comcast had violated
federal Internet policy. Comcast Corp., 23 FCC Rcd 13028 (2008).
In Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010), this Court
found that the Comcast administrative enforcement order had failed to tie the
agency’s authority to a specific statutory grant of power. Congress’s
establishment of Internet policy in 47 U.S.C. § 230(b), the Court held, did not
grant the agency authority to regulate Internet access. 600 F.3d 652-658.
The Court recognized that Section 706 of the 1996 Act could “be read to
delegate regulatory authority,” but the Commission itself in “an earlier, still-
binding order” had interpreted the statute otherwise and “remains bound by
its earlier conclusion.” Id. at 658, 659. The Court declined to address several
other asserted bases for authority because the Commission had raised them
only in its brief on appeal. Id. at 660. 2.

The Open Internet

Proceeding.

While the Comcast matter was pending, the Commission began the
proceeding that resulted in the Open Internet rules. The Order was issued,
however, after the Comcast decision, and it rested on full public comment
that did not exist in the Comcast matter and authorities that the Commission
had not relied on in that proceeding.
10 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 24 of 122
In 2007, the Commission issued a Notice of Inquiry seeking input on
industry practices. Broadband Industry Practices, 22 FCC Rcd 7894 (2007).
The following year, the Commission sought public comment on whether it
should propose openness rules. Network Management Practices, 23 FCC
Rcd 343 (2008). In 2009, the Commission took “the next step” in its
“longstanding effort” to preserve Internet openness, and sought comment on
proposed rules. Open Internet Notice, 24 FCC Rcd 13064, 13065 (2009).
After receiving more than 100,000 comments and conducting hearings
and workshops, Order ¶2 (JA 2), the Commission adopted high-level rules to
effectuate the agency’s longstanding protection of Internet openness. The
comments were unanimous that the Internet should remain open. Id. ¶11 (JA
4-5). 3. Openness Drives Investment.
Citing economic analysis and other record evidence, the Commission
concluded that Internet openness has driven innovation and investment in
broadband facilities. Edge providers’ low barriers to entry under an open
Internet led to “new uses of the network,” in the form of “content,
applications, services, and devices” available to all end users. Order ¶3 (JA
3). Each innovation, the Commission explained, promotes “increased end-
user demand for broadband,” which drives broadband access providers to
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invest in “network improvements,” which in turn lead to “further innovative
network uses,” thus creating a demand-driven “virtuous circle” of innovation
and investment. Id. ¶14 (JA 6-7). 4.

Threats To Internet Openness And Investment.

There is, however, no technological requirement that the Internet
remain open. “[S]ophisticated network management tools” now give
broadband Internet access providers the “ability to make fine-grained
distinctions in their handling of network traffic.” Order ¶31 (JA 19). In
particular, “deep packet inspection” allows broadband providers to determine
the contents (telephone call, video, etc.) and source of a particular packet of
Internet data. See Open Internet Notice ¶57 (JA 331). Using that
information, the provider could slow, stop, or manipulate data to affect its
delivery. A service provider could prevent an end user from accessing
Netflix, or the New York Times, or even this Court’s own website, unless the
website paid the provider to allow customer access. Similarly, a service
provider could demand payment from edge providers for delivery speeds that
make viable data-intensive services like video delivery.
Demand for payment from an edge provider to allow end-user access
would increase barriers to entry of new services and would make it more
difficult to attract the necessary financing for start-up Internet ventures.
12 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 26 of 122Order ¶42 (JA 26-27). The next Google or Facebook might never begin.
Uncertainty over the regulatory environment could also discourage
investment. Id. & n.137 (JA 26-27). Increasing barriers to entry and limiting
end users’ ability to choose which edge providers to patronize, the
Commission explained, “would reduce the rate of innovation at the edge and,
in turn, the likely rate of improvements to network infrastructure.” Id. ¶14
(JA 7).
The Commission identified three service provider incentives to
interfere with customer choice and “reduce the current openness of the
Internet.” Order ¶21 (JA 11).
First, some broadband providers have an economic incentive “to block
or otherwise disadvantage specific edge providers or classes of edge
providers … to benefit [their] own or affiliated offerings at the expense of
unaffiliated offerings.” Ibid. For instance, cable companies that also provide
broadband access service have an incentive to interfere with their customers’
access to Internet-based video services like Netflix. Ibid. (JA 11-12); id. ¶23
& n.60 (JA 14). Telephone companies such as Verizon have the same
incentive to interfere with Internet-based voice services like Vonage or Skype
13 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 27 of 122
2
(which is reported to account for one-third of all long distance minutes ). See id. ¶22 (JA 12). And companies that offer a “triple-play” of voice, cable, and
broadband – such as Verizon’s FiOS – would have the incentive to
discriminate against competing providers of both video and voice services. See ibid.
Second, although edge providers “already pay for their own
connections to the Internet,” Order ¶24 (JA 15), an end-user’s provider could
interfere with or block its customers’ access to the edge provider unless the
edge provider paid another fee to that provider, ibid. Because many edge
providers are small entrepreneurs, they are especially sensitive to such a
barrier to entry. Id. ¶26 (JA 16).
Third, the Commission determined that, if broadband providers could
“profitably charge edge providers for prioritized access,” they would have
“an incentive to degrade or decline to increase the quality of the service they
provide to non-prioritized traffic.” Order ¶29 (JA 18).
Moreover, the Commission found that the threats could be
“exacerbated by … market power” exercised by access providers. As of
December 2009, nearly 70 percent of households live in areas served by one

2 See http://gigaom.com/2012/09/03/happy-birthday-skype-in-9-years-you-
changed-telecom/.
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or two providers of broadband service, and 20 percent have only one option. Order ¶32 (JA 19-20).
Provider incentives to reduce openness were not merely theoretical; the
record showed that broadband providers had acted to block or discriminate
against disfavored applications. In addition to the Comcast and Madison
River incidents, Cox, another major cable modem provider, admitted to
blocking file-sharing applications, and cable/telephone company RCN settled
litigation alleging it had done the same thing. Order ¶36 & nn.108-111 (JA
22). AT&T admittedly restricted its mobile customers’ ability to use various
competing calling applications, such as Skype, from their cell phones. Ibid.
& n.107 (JA 21-22). Indeed, Skype has “faced significant difficulty in
gaining access across wireless Internet connections.” Id. ¶100 & n.308 (JA
56). And a mobile broadband provider was charged with blocking credit card
processing services that competed with affiliated operations. Id. ¶35 (JA 21).
The Commission also noted that “broadband providers’ terms of service
commonly reserve to the provider sweeping rights to block, degrade, or favor
traffic.” Ibid. & nn.112-113 (JA 21). 5. The Open Internet Rules.
The Commission adopted three rules that preserve a customer’s ability
to “go where [he or she] wants on the Internet and communicate with anyone
15 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 29 of 122
else on line.” Order ¶43 (JA 27). The rules apply to “broadband Internet
access service,” which the Commission defined as “a mass-market retail
service that provides the capability to transmit data to and receive data from
all or substantially all Internet end points.” Id. ¶44 (JA 28); 47 C.F.R.
§ 8.11(a). a. Fixed Service Rules.
The rules apply differently to fixed and mobile wireless service
providers; we describe the fixed service rules first.

Broadband providers may not block customer access
to lawful content, applications, services, or devices. Order ¶63 (JA 38); 47
C.F.R. § 8.5(a). The rule also prevents “impairing or degrading particular
content, applications, services, or non-harmful devices so as to render them
effectively unusable.” Ibid.; see Order ¶66 (JA 39).

No Unreasonable Discrimination.

Broadband providers “shall not unreasonably discriminate in transmitting lawful network traffic” to their
customers. Order ¶68 (JA 40) (emphasis added); 47 C.F.R. § 8.7. Network
16 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 30 of 122
practices are reasonable if they are “tailored to achieving a legitimate network
management purpose,” Order ¶82 (JA 48), such as “ensuring network
security and integrity,” contending with “traffic that is unwanted by end
users” (by implementing parental controls), or “reducing or mitigating the
effects of congestion on the network.” Ibid. b. Mobile Wireless Rules.
The Commission applied even lighter rules to mobile broadband
service (e.g.,via cellular networks). Mobile broadband is less mature and
more rapidly evolving than fixed service; consumers have more choices for
mobile broadband; and providers face “operational constraints” that fixed
broadband networks do not. Order ¶¶94-95 (JA 52-53).
The Commission applied to mobile providers the same transparency
rule that applies to fixed service providers. Order ¶98 (JA 55). The
Commission prohibited mobile Internet access providers from blocking
customer access to lawful websites or applications that compete with the
service providers’ own voice or video telephony services. Id. ¶99 (JA 55); 47
C.F.R. § 8.5(b). The Commission declined, however, to apply to mobile
service the rule forbidding unreasonable discrimination, deciding instead to
rely on the anti-blocking rule while continuing to “monitor the development
of the mobile broadband marketplace.” Order ¶104 (JA 58).
17 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 31 of 122
Verizon and MetroPCS (hereafter “Verizon”) now ask that the Open
Internet Rules be vacated.

SUMMARY OF ARGUMENT

The Internet developed and flourished in an environment of openness.
That openness has been essential to the creation of services and applications
that have driven consumer demand for and corresponding investment in
broadband access service. Congress assigned the FCC – in which it vested
policy-making authority over all communication by wire and radio – a central
role in protecting Internet openness and the resulting investment in broadband
facilities. Congress recognized that consumer demand for Internet access,
stimulated by vigorous innovation in services available on the Internet, is the
ultimate driver of such investment.
Verizon’s attack on the Open Internet Rules rests on two fundamental –
and fundamentally flawed – premises. Verizon first characterizes the
Commission as having “conjured a role” and “inserted itself” into broadband.
But that description cannot be squared with multiple indications to the
contrary: the FCC’s congressionally assigned role in communications, the
history of oversight of computer-based services, the agency’s discretion,
confirmed by the Supreme Court, to classify broadband as an information or
telecommunications service, the specific commands of Section 706, the
18 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 32 of 122
Commission’s established authority to issue and modify spectrum licenses in
the public interest, and the Commission’s longstanding authority to craft
policy for information services to further its numerous other functions.
Verizon’s second flawed premise is that the Open Internet Rules are a
solution in search of a problem and serve no policy purpose. In fact, the
record before the Commission showed multiple incidents of broadband
providers interfering with their customers’ ability to use Internet services,
from file sharing services to Internet-based telephony. The Commission also
identified a trio of powerful economic incentives, amplified by increasing
technological capability and limited competition among broadband providers,
to discriminate among edge providers and to block customer access to
Internet sites of their choosing. That record itself justifies Commission
action, but the law does not demand the Commission to wait until harm has
already occurred.
The Open Internet Rules were a reasonable exercise of the
Commission’s discretion:
1. Sections 706(a) and (b) of the 1996 Act grant direct authority to set
policy for broadband Internet access service. Both provisions state that the
Commission “shall” – the language of command – take action to foster
increased investment in broadband infrastructure. As the legislative history
19 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 33 of 122
establishes, Congress intended that command to be a “fail safe” source of
authority in addition to other statutory powers.
2. The Commission’s plenary authority over spectrum licenses under
Title III of the Communications Act separately authorizes the mobile
broadband rules. The Commission may issue a license only when doing so
will serve the public interest, and it may modify licenses when the public
interest requires. The Commission also has authority to prescribe the nature
of a licensee’s service. The mobile Open Internet Rules fall comfortably
within the terms of the statute.
3. The Commission has authority to adopt these rules to further its
other statutory responsibilities. Most particularly, Section 201(b) of the Act
gives the Commission power to ensure that telephone rates are just and
reasonable. Rules that protect Internet-based telephone service from being
blocked serve that mandate by preserving competition in the telephone
market. Section 628 of the Act gives the Commission authority to protect
competition in video distribution. With Internet-based video services
becoming an increasingly important aspect of competition between cable
systems and satellite systems, blocking or degrading of Internet traffic
threatens to eviscerate Congress’s intent to protect competition.
20 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 34 of 122
Because the Commission rooted its authority to promulgate the Open
Internet Rules in the specific statutory mandates of Sections 706(a) and (b),
Title III, Section 201, Section 628, and others, this case is not simply (as
Verizon suggests) a rerun of Comcast. There, the Court reversed the
Commission’s assertion of enforcement power because the Commission had
not tied its authority to specific substantive statutes. Here, by contrast, the
Commission developed a comprehensive administrative record demonstrating
that action was necessary to carry out the commands of several specific
statutory mandates – none of which the Comcast panel addressed on its
merits. The Commission does not rely here on any substantive authority that Comcast rejected on the merits.
4. The Commission reasonably concluded that the Open Internet Rules
do not treat broadband providers as common carriers. Under the
Communications Act, common carriage is a service provided “upon
reasonable request.” 47 U.S.C. § 201(a). Edge providers do not request
service from the end users’ broadband provider; they have their own Internet
access provider. It is the end user that makes the relevant “request” for
service, and even Verizon does not argue that the rules create a common-
carriage obligation as to the end user. Access to a website on the Internet
21 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 35 of 122
therefore does not resemble carriage of programming on a cable system,
which is initiated at the request of the programmer and not the viewer.
5. The Open Internet Rules are consistent with the First and Fifth
Amendments. Internet access providers do not engage in speech; they
transport the speech of others, as a messenger delivers documents containing
speech. Unlike cable systems, newspapers, and other curated media,
broadband providers do not exercise editorial discretion. Verizon has
defended itself from lawsuits on that very ground. If the First Amendment
applies at all, the Open Internet Rules are narrowly tailored to serve important
government interests.
The rules result in no taking without just compensation because, among
other things, broadband access providers are compensated for the use of their
networks.
6. Finally, the record supports the rules, which are neither arbitrary nor
capricious.

THE FCC REASONABLY INTERPRETED SECTION 706 AND TITLE III AS GRANTS OF DIRECT AUTHORITY TO IMPLEMENT THE OPEN INTERNET RULES.

A. The Commission Reasonably Read Section 706 As A

Grant Of Direct Authority And Properly Found That The Open Internet Rules Would Carry Out The Statutory Mandate.

Consistent with the statutory language, the Commission reasonably
construed Sections 706(a) and 706(b) to grant the Commission authority for
the Open Internet Rules. 1. The Commission’s Reading Of Section 706 Is

Consistent With Its Plain Language And Entitled To Deference.

a. Section 706(a) of the Telecommunications Act of 1996 instructs
that the Commission “shall encourage the deployment on a reasonable and
timely basis of advanced telecommunications capability to all Americans” by
using “measures that promote competition in the local telecommunications
market” and “other regulating methods that remove barriers to infrastructure
investment.” 47 U.S.C. § 1302(a). “[A]dvanced telecommunications
25 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 39 of 122
capability” includes broadband Internet access. 47 U.S.C. § 1302(d)(1); see Order ¶117 & n.359 (JA 64).
The Commission reasonably interpreted Section 706(a) as having
“invested the Commission with the statutory authority to carry out” its
commands. Order ¶120 (JA 65); accord id. ¶122 (Section 706(a) “provides
... a specific delegation of legislative authority to promote the deployment of
3
advanced services.”) (JA 67). Congress’s use of the word “shall” “generally
indicates a command that admits of no discretion,” Ass’n of Civilian Techs. v. FLRA, 22 F.3d 1150, 1153 (D.C. Cir. 1994), and thus requires the
Commission to take action. Here, Congress (1) told the Commission that it
“shall” “encourage the deployment on a reasonable and timely basis of
advanced telecommunications capability to all Americans”; and (2) gave the
Commission the discretion to use its expert judgment to use not only
specified tools, but also “measures that promote competition in the local
telecommunications market” and “other regulating methods that remove
barriers to infrastructure investment.” 47 U.S.C. § 1302(a).

3 Verizon characterizes the Commission’s reliance on Section 706(a) in the Order as resting on a theory of “ancillary” authority, Br. 24, 25, 26, but the agency determined that the statute granted direct authority. See Order ¶122 (JA 67).
26 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 40 of 122
The Commission’s interpretation of Section 706(a) is therefore
consistent with the plain language of the statute. Indeed, this Court has
recognized that the statute “at least arguably … delegates” that authority to
the FCC. Comcast, 600 F.3d at 658. Thus, at a minimum, the agency has
discretion under Chevron to interpret the provision. See alsoAd Hoc, 572
F.3d at 906-907 (the “generous phrasing of § 706 means that the FCC
possesses significant, albeit not unfettered, authority and discretion to settle
on the best regulatory or deregulatory approach to broadband”). b. Section 706(b) independently grants authority for the Open Internet
Rules. Order ¶123 (JA 68). That provision directs the Commission to
determine periodically if broadband “is being deployed to all Americans in a
reasonable and timely fashion. If the Commission’s determination is negative
it shall take immediate action to accelerate deployment of such capability by
removing barriers to infrastructure investment and by promoting competition
in the telecommunications market.” 47 U.S.C. § 1302(b) (emphasis added).
In July 2010, the Commission concluded in the Sixth Broadband Deployment Report, 25 FCC Rcd 9556, 9558 ¶¶2-3 (2010), that “broadband deployment
to all Americans is not reasonable and timely,” thus triggering Section 706(b)
“as a consequence of that conclusion.” Order ¶123 (JA 68).
27 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 41 of 122
In light of that finding, Section 706(b) authorizes – indeed requires –
the Commission to accelerate deployment of broadband and promote
competition in telecommunications markets. The Open Internet Rules serve
both of those goals. Ibid. Accordingly, Section 706(b) independently
authorizes the Open Internet Rules. c. Legislative history buttresses the Commission’s interpretation of
Sections 706(a) and (b). The Senate Report for the bill that contained Section
706 explained that it was “intended to ensure that one of the primary
objectives of [the 1996 Act] – to accelerate deployment of advanced
telecommunications capability – is achieved,” and that the FCC was
empowered to “provide the proper incentives for infrastructure investment.”
S. Rep. No. 104-23 at 50 (1995); see Order ¶120 (JA 65). Section 706, the
Senate Report stated, “is a necessary fail-safe to ensure ... accelerate[d]
deployment” of broadband infrastructure. S. Rep. No. 104-23 at 51
(emphasis added). “It would be odd,” the Commission explained, for
Congress to have described Section 706 as a “fail safe” “if it conferred no
actual authority” the agency did not already have. Order ¶120 (JA 66).
The Commission’s interpretation of Section 706 is also bolstered by its
furtherance of several statutory “polic[ies] of the United States”: to “promote
the continued development of the Internet,” to promote “technologies which
28 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 42 of 122
maximize user control over what information is received” over the Internet,
and to “preserve the vibrant and competitive free market that presently exists
for the Internet.” 47 U.S.C. § 230(b)(1), (3) (emphasis added); see Order
¶¶71, 116 (JA 40, 63). Such policy provisions may “shed light on … express
statutory delegation[s] of authority.” Comcast,600 F.3d at 655. d. Verizon argues (Br. 29-30) that Section 706(a) should be read to
allow the FCC to use only authority already granted in other statutory
provisions. That claim has no basis in – and is certainly not mandated by –
the statutory text and, as discussed, is contrary to legislative history.
Congress could have enacted an explicit limitation in Section 706 of the kind
that Verizon imagines, or it could have created an exclusive list of the
authorities the Commission could exercise to further the statutory goal. It did
neither. Instead, Section 706(a) delegates to the Commission the authority to
use “other regulating methods that remove barriers to infrastructure
investment.” 47 U.S.C. § 1302(a). By its terms, that command is not tied to
4
other “specifically-enumerated” regulatory mechanisms.
Verizon’s reliance (Br. 28-29, 32) on the Advanced Services Order, 13
FCC Rcd 24012, as interpreted in Comcast, 600 F.3d at 658-659, is

4 That Section 706(a) also refers to state regulatory commissions is
immaterial. See Br. 28. As this Court indicated in Comcast, section 706 “contains a direct mandate” granting the FCC authority.
29 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 43 of 122
misplaced. There, the Court read the Advanced Services Order as a holding
by the Commission that Section 706(a) did not “constitute an independent
grant of authority.” The Court found that interpretation “still binding”
because the Commission had “never questioned, let alone overruled it.” 600
F.3d at 658. In the Order,however, the Commission did just that. It held
that if the Advanced Services Order could be interpreted as having declined to
read Section 706(a) as a grant of authority, “we reject that reading of the
statute,” for the reasons set forth in paragraphs 117-123 of the Order.Order
n.370 (JA 65).
That should end the matter. An agency’s reading of a statute is not
“carved in stone”; rather, the agency “must consider varying interpretations
and the wisdom of its policy on a continuing basis.” Chevron, 467 U.S. at
863-864. Chevron deference thus applies even if the agency has previously
interpreted the statute differently. Brand X, 545 U.S. at 981-982. Here, the
5
Commission explained why its interpretation was the proper one. See Order
¶¶117-123 (JA 64-68).

5 The Commission also clarified that the Advanced Services Order did not
reject Section 706 as a source of any authority, but addressed only the question whether Section 706 granted the Commission authority to act “through the mechanism of forbearance,” when a forbearance request does not meet the standards for forbearance set out in 47 U.S.C. § 160. Order¶118 (JA 65) (emphasis added).
30 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 44 of 122e. Nor is Verizon correct that, if Section 706 grants the Commission
authority for the Open Internet Rules, “there is no stopping point to the
authority [the Commission] could assert over the Internet.” Br. 31; see id.
26-27. The Commission recognized several inherent limitations on its
authority.
First, the agency explained that its “mandate under Section 706(a) must
be read consistently with Sections 1 and 2 of the Act,” 47 U.S.C. §§ 151, 152,
“which define the Commission’s subject matter jurisdiction over ‘interstate
and foreign commerce in communications by wire and radio.’” Order ¶121
(JA 66). The same consideration would apply to Section 706(b). Verizon
wrongly suggests (Br. 26-27, 31) that the Commission claims authority over
edge providers and others that utilize the services of wire- and radio-based
communications providers. Unless an edge provider renders services (such as
voice service) that themselves fall within the Act, the Commission would
have no more authority over an edge provider than it has over the customers
31 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 45 of 122
of ordinary telephone service, who also use fixed and mobile communications
6
media.
Second, the Commission recognized that the text of the statute requires
that any regulation under Section 706(a) must “encourage the deployment on
a reasonable and timely basis of advanced telecommunications capability to
all Americans.” 47 U.S.C. § 1302(a). Thus, to invoke Section 706(a), the
Commission must establish, as it did in detail here, see pp. 37-43, infra, that
its regulatory actions will encourage deployment of broadband facilities.
Likewise, to act under Section 706(b), the Commission must find that
broadband is not being deployed in a “reasonable and timely” way.
Third, as relevant here, Section 706(a) permits the FCC to take only
two categories of action: “measures that promote competition in the local
telecommunications market” and “other regulating methods that remove
barriers to infrastructure investment.” Order ¶121 (JA 66). Section 706(b) is
likewise limited to similar measures. 47 U.S.C. § 1302(b).

6 In its Statement of the Case, Verizon suggests that the Commission
“expressly reserved the right to regulate the prices that broadband providers charge their own end-users,” Br. 9, citing Order n.381 (JA 67). The footnote cites the price regulation provision of Section 706 to illustrate that Congress did not authorize only deregulation. The Commission said nothing about a “right” to regulate end-user pricing.
32 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 46 of 122
Section 706 of the 1996 Act thus is less open-ended than sections of
the Communications Act that have been upheld against legal challenge. For
instance, 47 U.S.C. § 201(b) authorizes the FCC to ensure “just” and
“reasonable” common carrier rates and practices, and Title III allows
regulation of wireless services in the “public interest.” See, e.g., NBC v. United States, 319 U.S. 190, 216 (1943) (public interest standard is “as
concrete as the complicated factors for judgment in such a field of delegated
authority permit”); Order ¶122 (JA 67). Indeed, in addition to the limits
discussed above, Section 706(a) also contains the same public-interest
limitations that apply to the FCC's grant of Title III licenses. See id.¶121 (JA
66). f. Verizon admits that Section 706(b) grants the FCC some authority,
but contends that the grant of authority is limited to “geographical areas that
are not served by any provider” of broadband service. Br. 33. But the statute
contains no such limitation, and Verizon identifies none. The reference to
“geographical areas” on which Verizon relies comes from Section 706(c),
which does not limit 706(b), but merely specifies that the Commission is
obligated to set forth a list of unserved geographical areas.
Verizon also fleetingly challenges (Br. 33) the FCC’s 2010 finding that
broadband was not being timely deployed, which triggered the agency’s
33 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 47 of 122
Section 706(b) authority. Sixth Broadband Report, 25 FCC Rcd at 9558.
That two-year-old decision is not subject to review here, see 28 U.S.C.
§ 2344 (60-day period for review), and Verizon cites no precedent requiring
the Commission to reopen that issue now. g. At bottom, Verizon’s argument rests on the sweeping assertion that
Congress fenced Internet access off from FCC policymaking and thus that the
Commission’s reading of Section 706 (and other provisions that grant
authority) departs from that established directive. See Br. 2, 23. That
argument is simply wrong. The Act grants the FCC undisputed subject
matter jurisdiction over “all interstate and foreign communication by wire or
radio.” 47 U.S.C. § 152(a). When Congress enacted the 1996 Act, moreover,
it did so against the backdrop of the FCC’s longstanding Computer regime. See pp. 5-6, supra. In the 1996 Act, Congress did not strip the FCC of that
authority, but left to the Commission’s discretion the decision whether
broadband access should be regulated as a Title II telecommunications
service or a Title I information service. See Brand X, 545 U.S. at 976-977.
And, in addition to Section 706, Congress enacted Section 230(b), which sets
forth policies – including consumers’ control over the Internet content they
access – to guide the agency’s exercise of its “statutorily mandated
responsibility.” Comcast, 600 F.3d at 661.
34 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 48 of 122
In its comments to the Commission during the rulemaking proceeding
that considered whether to classify wireline broadband Internet access as a
Title I information service, Verizon took a very different position. It
contended then that “[r]egulating broadband under Title I does not necessarily mean completely deregulating broadband facilities and services;
it means applying regulations tailored to suit the needs of the broadband
market.” Verizon 02-33 Commentsat 42 (emphasis added). Verizon may
believe that these particular rules are not “suit[ed]” to “the needs of the
broadband market,” but that second-guesses only the agency’s policy
judgment, not its statutory authority.
Verizon’s reliance (Br. 12, 22, 23, 24) on Brown & Williamson, 529
U.S. 120, is misplaced. Contrary to Verizon’s argument, “common sense,” id. 133, suggests that the federal agency with “unified jurisdiction” over “all
forms of electrical communication,” Southwestern Cable, 392 U.S. at 168,
and with the ability to establish policies to accommodate “the dynamic
aspects” of communications technology, Pottsville Broadcasting, 309 U.S. at
138, has the authority to act to preserve the key attributes of the most
significant medium of communication today. As discussed, the text and
legislative history of the relevant statutes and the regulatory backdrop against
which Congress acted confirm that conclusion. Unlike the FDA in Brown &
35 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 49 of 122Williamson, the FCC has never “disavowed” its authority, id. 125,over
Internet access, but has continuously exercised that authority since the earliest
days of the Internet. See Wireline Broadband Order, 20 FCC Rcd at 14914;
pp. 5-9, supra. And unlike with tobacco, Verizon cannot show here that
“Congress has directly spoken to the issue here and precluded the [FCC’s]
jurisdiction to regulate” broadband Internet access service through other
statutes. 529 U.S. at 133.
Verizon is similarly wrong to assert that Commission authority under
Section 706 (as well as Title III and other provisions discussed below), would
result in Congress’s having “hid[den] elephants in mouseholes.” Br. 23,
quoting Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001). Section
706 plainly envisions an FCC role in broadband policy, see Ad Hoc, 572 F.3d
at 907, and Section 706(b) commands the Commission to act immediately to
enhance broadband deployment and competition. Congress described Section
706 as a “fail safe” provision to ensure the FCC’s ability to promote
broadband deployment. There is nothing trivial or obscure about such
explicit statutory commands. h. Finally, Verizon is incorrect in claiming that congressional inaction
on legislation granting the FCC specific authority to adopt Open Internet
Rules “confirms that the Commission lacks authority to promulgate” rules.
36 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 50 of 122
Br. 23. Such “subsequent legislative history” is “an unreliable guide to
legislative intent,” Tax Analysts v. IRS, 350 F.3d 100, 104 (D.C. Cir. 2003),
particularly when it concerns “proposals that do not become law,” PBGC v. LTV Corp., 496 U.S. 633, 650 (1990) (citations omitted). In any event, the
subsequent legislative history is mixed, as Congress also failed to pass a
resolution that would have struck down the Open Internet Rules. See H.R.J.
Res. 37, 112th Cong. (2011). 2. The Commission Reasonably Determined That The

Open Internet Rules Would Advance The Statutory Mandate.

Determining how best to implement the mandate of Section 706 is a
quintessential exercise of the FCC’s discretion and expertise to make
predictive judgments. This Court has recognized the “the substantial
deference” it gives to such judgments, Cablevision, 649 F.3d at 716, and
particularly the high degree of deference it accords to predictions about the
“likely economic effects of a rule,” National Telephone Co-Op Ass’n v. FCC,
563 F.3d 536, 541 (D.C. Cir. 2009). a. Protecting Innovation That Drives Demand For

And Investment In Internet Infrastructure.

As the Commission explained, the Rules will encourage and accelerate
deployment of broadband facilities through the virtuous circle, a concept
acknowledged by numerous commenters, including Verizon. The value of
37 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 51 of 122
the Internet to users lies in the content, services, and applications it makes
available. Continued innovation in services depends on low barriers to entry
and the assurance that users will be able to reach edge providers. The Open
Internet Rules thus protect the creation of new services. The resulting
consumer demand for more, faster, and better Internet connections drives
access provider investment in infrastructure to satisfy that demand, thus
serving the goals that the Commission must further under Section 706(a) and
(b). Order ¶117 (JA 64).
Verizon derides the Commission’s prediction as a “triple cushion
shot.” Br. 28. But the Commission’s prediction is both logical and rooted
firmly in the record. Historically, the Commission found, demand for
Internet-based services has “led to major network improvements.” Order ¶14
(JA 7), citing, inter alia, Comcast Comments at 2, 8 (JA 685, 691); Sony
Comments at 5 (JA 745). The record showed that “the increasing availability
of multimedia applications” (such as YouTube, Netflix, and Hulu) “helped
create demand for residential broadband services,” and that broadband
providers “responded by adopting new network infrastructure, modem
technologies, and network protocols.” Order n.23 (JA 7), citing Chetan
Sharma, Managing Growth and Profits in the Yottabyte Era (2009) (JA 277).
A paper by economist Nicholas Economides, submitted by Google, similarly
38 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 52 of 122
concluded that preserving an open Internet “will be highly beneficial” in
preserving consumer demand-driven investment in broadband infrastructure.
Google Comments, App. A at 13, 14 (JA 630, 631).
Other industry participants – including both petitioners here –
concurred that consumer demand could drive network investment. See CTIA
Reply at 22 (Supp JA 3); CTIA Comments at 32 (JA 716); Sony Reply at 6
(JA 827);Google Comments at 5, 34-36 (JA 592, 607-609); Skype Reply at
14 (JA 817); Software & Information Industry Association Comments at 3
(JA 737); Earthlink Reply at 4 (JA 801); Clearwire Comments at 7 (JA 643).
Indeed, petitioner MetroPCS called the Internet “the model of the virtuous
cycle: innovators are creating content and application products that
consumers desire, which drives consumers to purchase from service and
equipment providers, which in turn drives investment in infrastructure and
new technology in response to consumer demand.” MetroPCS Comments
(Jan. 14, 2010) at 16 (JA 552). Verizon, as part of a consortium of leading
broadband providers and trade associations, stated that innovation by both
edge providers and access providers “mutually expands opportunities for the
other,” and that “the better the network capabilities available to ‘edge’
providers, the greater the opportunity for them to develop innovative services
39 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 53 of 122
that increase consumer demand for broadband.” NCTA, Verizon, et al. Feb.
22, 2010, ex parte at 4 (JA 762).
Verizon relies on some commenters’ assertions that Open Internet
Rules would not lead to greater investment. Br. 7, 31. But, as noted, the
record also contains considerable evidence ratifying the Commission’s
judgment that innovation in edge services drives investment by access
providers, and the Commission concluded that its position was supported by
the weight of the evidence. Order ¶40 (JA 24-25). With evidence on both
sides, the agency’s conclusions are supported by substantial evidence “even
though a plausible alternative interpretation of the evidence would support a
contrary view.” Secretary of Labor, 111 F.3d at 918. In fact, subsequent to
the adoption of the Open Internet Rules, investment has surged, with venture
capital funding for Internet-specific companies rising 68 percent,7 and
investment in wired and wireless network infrastructure rising by 24 percent
from 2010 to 2011.8

The Open Internet Rules foster “competition in the local
telecommunications market” as directed by Section 706(a) and “competition
in the telecommunications market” as directed by Section 706(b). The
transparency rule, in particular, “ensures that end users can make informed
choices regarding the purchase and use of broadband service, which promotes
a more competitive market for broadband services.” Order ¶53 (JA 32).
The rules also promote competition by protecting Internet-based
telephone services from being blocked by incumbent providers. The
Commission explained that Internet-based telephone services known as
“Voice over Internet Protocol” or “VoIP” “are increasingly being used as a
substitute for traditional telephone service.” Order ¶22 & nn.49-50 (JA 12-
13) (quotation marks omitted). Broadband providers who also sell their
customers telephone service thus have the incentive to discriminate against
such competition. Id. ¶¶22-24 (JA 12-15); see Vonage April 21, 2010, ex parte at 3 (JA 793); Skype Nov. 30, 2010, ex parte at 2 (JA 1033); NCTA
42 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 56 of 122
Dec. 10, 2010 ex parte at 2-3 (JA 1051-1052). The prohibitions on blocking
and unreasonable discrimination will protect competition in local
telecommunications markets and directly fulfill the statutory mandate.

B. The Commission Reasonably Interpreted Title III Of

The Communications Act To Grant Authority For The Mobile Rules.

Title III of the Communications Act separately grants the Commission
direct authority to promulgate Open Internet Rules for wireless broadband
Internet access. Under Title III, the FCC is to “maintain the control of the
United States over all the channels of radio transmission.” 47 U.S.C. § 301.
Congress empowered the agency to grant licenses to use radio spectrum only
when the “public convenience, interest, or necessity will be served” by a
grant. 47 U.S.C. § 307(a). It directed the Commission to “[p]rescribe the
nature of the service to be rendered by … each [radio] station within any
class,” 47 U.S.C. § 303(b), and to “encourage the larger and more effective
use of radio in the public interest,” 47 U.S.C. § 303(g).
To effectuate these commands, Congress accorded the Commission the
authority to “[m]ake such rules and regulations and prescribe such restrictions
and conditions … as may be necessary to carry out the provisions” of the
Communications Act. 47 U.S.C. § 303(r).
43 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 57 of 122
Title III gives the Commission “expansive powers” and a
“comprehensive mandate” over spectrum licenses. NBC, 319 U.S. at 219.
The public interest standard “serves as a supple instrument for the exercise of
discretion by the expert body which Congress has charged to carry out its
legislative policy.” Pottsville Broadcasting, 309 U.S. at 137-138. See CBS v. Democratic National Committee, 412 U.S. 94, 122-123 (1973) (Congress left
policy questions for the FCC); Schurz Communications, Inc. v. FCC, 982
F.2d 1043, 1048 (7th Cir. 1992) (Posner, J.) (Commission has “enormous
discretion” to impose public interest obligations).
The Commission’s plenary authority over spectrum licenses allows the
Commission to place public interest conditions not only on newly issued
licenses, but also on existing licenses, whenever doing so “will promote the
public interest, convenience and necessity.” 47 U.S.C. § 316. Because that
grant of authority is not limited by any other provision in the Act, a licensee
has “no vested right to any specific [license] terms.” Celtronix, 272 F.3d at
589; see Committee for Effective Cellular Rules v. FCC, 53 F.3d 1309 (D.C.
Cir. 1995) (affirming rule changes that effectively modified licenses).
The mobile Open Internet Rules fall well within these established
standards. The rules “are necessary to advance the public interest in
innovation and investment” using wireless licenses. Order ¶134 (JA 75). In
44 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 58 of 122
particular, for the reasons discussed in detail at pages 37-43 above, the rules
(among other things) fulfill Congress’s directives that the Commission use its
spectrum licensing authority to “seek to promote … the development and
rapid deployment of new technologies, products and services for the benefit
of the public,” 47 U.S.C. § 309(j)(3)(A),and “ensur[e] that new and
innovative technologies are readily accessible to the American people,” 47
U.S.C. § 309(j)(3)(B). Indeed, as the Commission pointed out, in 2007 it had
placed an open platform condition resembling the Open Internet Rules on
licenses in the 700 MHz block. (Notably, Verizon was the high bidder for
and was awarded those licenses.) Order ¶134 (JA 75).
Verizon would interpret Title III of the Communications Act as a
straitjacket that grants only “specific authority relating to issues such as
preventing interference and assigning classes of stations to particular
frequency bands.” Br. 38. That limitation has no basis in the statutory
language, and Verizon cites none. See id. 37-41. Verizon’s argument also
clashes with the Supreme Court’s holding, rejecting a substantially similar
claim, that “[t]he [Communications] Act itself establishes that the
Commission’s [Title III] powers are not limited to the engineering and
technical aspects of radio communication.” NBC, 319 U.S. at 215.
45 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 59 of 122
Verizon’s claim that there is no legislative “grant of authority” over the
terms of service offered by wireless licenses, Br. 38-39, is bewildering. The
Act grants the FCC authority to, among other things, “[p]rescribe the nature
of the service to be rendered by … each [radio] station within any class,” 47
U.S.C. § 303(b), and “modify” the terms of such licenses in the public
interest, id. § 316. Such provisions give the agency the authorityto adapt to
an ever-changing industry. See PottsvilleBroadcasting, 309 U.S. at 137-138.
Under them, the Supreme Court has upheld such FCC action as restrictions
on broadcast stations’ ownership of newspapers, FCC v. NCCB, 436 U.S. 775
(1978) (FCC can adopt rules to achieve “permissible public-interest goals”),
and limits on the number of licenses an entity could hold, FCC v. Storer Broadcasting Co., 351 U.S. 192 (1956); see Mobile Relay Assocs. v. FCC,
457 F.3d 1, 12 (D.C. Cir. 2006).
Verizon’s cases are inapt. FCC v. Sanders Bros. Radio Station, 309
U.S. 470 (1940), does not bar the FCC from imposing any requirement that
“regulate[s] the business” of an FCC licensee. There, contrasting the FCC’s
regulation of broadcasters with that of common carriers, the Court stated that
the FCC “is given no supervisory control of the [broadcaster’s] programs, of
business management or of policy.” 309 U.S. at 475. Verizon seriously
misconstrues that passage to mean that the FCC cannot impose any regulation
46 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 60 of 122
affecting a licensee’s business. Every regulation will affect a licensee’s
business in some way. But Congress gave the Commission authority to
specify “the nature of the service to be rendered,” by a licensee, 47 U.S.C.
§ 303(b), and the Commission merely exercised that authority. MPAA v. FCC, 309 F.3d 796 (D.C. Cir. 2002), has no bearing here because, unlike the
rules at issue there, the mobile wireless Open Internet Rules are authorized
directly by statute, including Sections 303(b) and 316.
Finally, Verizon asserts that the Open Internet Rules unlawfully
“fundamentally change” the terms of its wireless licenses. Br. 40. That
assertion cannot be squared either with the reality of the Commission’s action
or with Verizon’s own statements. Verizon’s licenses entitle it to provide
mobile communications services, and Verizon may still provide the same
wireless services over the same frequencies to the same customers.
Moreover, Verizon argues in its brief that “broadband providers today
generally provide subscribers access to all lawful [Internet] content … and
have strong economic incentives to continue to do so,” Br. 51. That, in
addition to transparency, is all the wireless mobile rules require. MCI v. AT&T, 512 U.S. 218 (1994), which Verizon cites (Br. 40), overturned an
FCC order issued under authority to “modify” tariff filing rules but that eliminated a rule. It is not to the contrary.
47 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 61 of 122
MetroPCS’s separate attack on the Commission’s assertion of authority
under Title III is contrary to the arguments MetroPCS is simultaneously
making to this Court in another pending case, Cellco Partnership (No. 11-
1135). There, MetroPCS has recognized that “by its plain language, §303(b)
[of the Communications Act] may … be used to affirmatively expand a
licensee’s obligations.” Br. of MetroPCS in No. 11-1135 at 2. Indeed, in
making that argument, MetroPCS relies, ibid., on the 700 MHz Order that
required – similar to the Open Internet Rules – licensees to maintain an open
platform for Internet access.

II.

THE FCC REASONABLY DETERMINED THAT THE OPEN INTERNET RULES FURTHER OTHER STATUTORY DUTIES.

Congress charged the Commission with regulating communications
facilities “to make available … to all the people of the United States … a
rapid, efficient, Nation-wide and world-wide wire and radio communication
service.” 47 U.S.C. § 151. Congress granted the Commission authority to
“perform any and all acts [and] make such rules and regulations … as may be
necessary in the execution of its functions.” 47 U.S.C. § 154(i). Consistent
with such flexible grants of authority, the Supreme Court has warned against
“stereotyp[ing] the powers of the Commission to specific details in regulating
48 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 62 of 122
a field of enterprise the dominant characteristic of which was the rapid pace
of its unfolding.” NBC, 319 U.S. at 219-220.
The Commission thus may have authority over communications
matters even where Congress granted “no express authority.” Comcast, 600
F.3d at 646. Such “ancillary” authority exists when (1) the subject matter
falls under Title I of the Act, i.e. constitutes communication by wire or radio;
and (2) when such authority is “reasonably ancillary to the Commission’s
effective performance of its statutorily mandated responsibilities.” Ibid.,
9
citing American Library, 406 F.3d at 691-692.
There is no dispute concerning the first prong of that test. The
Commission identified a number of provisions in the Communications Act
that satisfy the second prong. Order ¶¶ 124-137 (JA 68-77).
Verizon asserts (Br. 23) that the Commission’s reliance on multiple
statutes to support its actions somehow indicates a lack of authority,
paradoxically suggesting that an action supported by more statutory
provisions is less likely to be within a grant of authority. But Congress
granted the Commission authority over the telephone, broadcasting, and cable
television industries, and the Internet is causing fundamental shifts in each of

9 The Commission believes that this Court’s test is more restrictive than the
“various responsibilities” test established by the Supreme Court in Southwestern Cable, 392 U.S. at 178, and similar cases.
49 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 63 of 122
them. The Commission must take account of those changes in discharging its
statutory responsibilities. As we show below, the Commission demonstrated
how the Open Internet Rules further the Commission’s performance of duties
assigned to the agency in Titles II, III, and VI of the Communications Act.

A. Section 201(b) Of The Communications Act Grants

Authority To Adopt Rules Protecting Telephone Competition.

Section 201(b) makes it unlawful for any “charges, practices,
classifications, and regulations” for common carrier services to be “unjust or
unreasonable” and grants the Commission the authority to “prescribe such
rules and regulations as may be necessary in the public interest to carry out”
that command. 47 U.S.C. § 201(b).
VoIP service is “increasingly being used as a substitute for traditional
telephone service.” Order ¶125 (JA 68); see id. ¶22 (JA 12) (citing record
comments). By presenting a competitive alternative to traditional telephone
service, VoIP therefore can “contribute to the marketplace discipline of voice
telecommunications services.” Id. ¶125 (JA 68). Yet companies that provide
both Internet access and traditional telephone service (such as Verizon) “have
the incentive and ability to block, degrade, or otherwise disadvantage the
services of their online voice competitors.” Ibid. (JA 69). Indeed, the Madison River case, 20 FCC Rcd 4295, involved exactly that practice, Order
50 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 64 of 122
¶35 & n.104 (JA 21). Similarly, AT&T has restricted its mobile customers’
ability to use competing calling applications, such as Skype, from their cell
phones. Ibid. & n.107 (JA 21-22); see also id. ¶100 & n.308 (JA 56).
As a competitive alternative to local telephone companies, VoIP helps
ensure reasonable prices and practices that the Commission must police under
Section 201(b). Order ¶125 (JA 68). Thus, the FCC reasonably concluded
that the Open Internet Rules further the FCC’s “statutorily mandated
responsibilities.” Comcast, 600 F.3d at 646.
Verizon asserts that the Commission may not rely on such market-
based economic mechanisms to fulfill its duties, but may only “address any
concerns about unreasonable common-carrier rates by regulating such rates”
directly. Br. 34. But rate regulation is at best a substitute for competitive
forces, and the Commission is entitled to rely on market forces in order to
avoid the need for such regulation. CCIA, 693 F.2d at 211; see also Orloff v. FCC, 352 F.3d 415, 419 (D.C. Cir. 2003) (upholding reliance on market
forces to ensure just and reasonable rates). In any event, the Commission
may carry out its statutory responsibilities not only to protect, but also to
“promote” the policies for which it has been given authority. United States v. Midwest Video Corp., 406 U.S. 649, 667 (1972).
51 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 65 of 122
Verizon also tries to distinguish Madison River on the ground that it
did not involve a broadband provider. Br. 34. That is incorrect. Order ¶35
(JA 21). Indeed, the company was charged with blocking its customers’
VoIP service – something that could be done only by a broadband provider.
In any event, the Commission reasonably concluded (and Verizon does not
contest) that incumbent telephone companies have the incentive and the
ability to interfere with Internet-based competitors. Prophylactic rules would
be justified even in the absence of documented abuses.
Verizon also asserts that Section 201(b) can authorize the Open
Internet Rules only in connection with Internet-based telephony. Br. 34. As
the Commission explained, however, “it is unlikely that broadband providers
could reliably identify [VoIP] traffic in all circumstances, particularly if voice
or video traffic originated from new services using uncommon protocols.” Order ¶48 & n.151 (JA 29). That is so “notwithstanding the increasing
sophistication of network management tools.” Ibid. In such cases of
inseparability between regulated and unregulated activity, the Commission’s
authority extends to all matters necessary to achieve its policy goals. E.g., Alascom, Inc. v. FCC, 727 F.2d 1212, 1220 n.30 (D.C. Cir. 1984)
(Commission has authority over intrastate communications when inseparable
from interstate communications).
52 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 66 of 122

B. Provisions In Titles VI And III Grant Authority To

Protect Competition In Video Markets.

1. Title VI.
Two provisions of Title VI, which governs cable programming, support
the Open Internet Rules.
First, Section 628, entitled “Development of Competition and Diversity
in Video Programming Distribution,” makes it unlawful for cable operators
and their affiliated satellite cable programming vendors to “engage in unfair
methods of competition … the purpose or effect of which is to hinder
significantly or to prevent any multichannel video programming distributor
10
from providing” programming to its subscribers. 47 U.S.C. § 548(b).
The administrative record showed that video programming distributors
“are seeking to keep and win customers by expanding their [video] offerings
to include online access to their programming.” Order ¶131 (JA 73). For
example, DISH, a satellite broadcast service, provides its customers access to
on-line video programming to compete with other video distributors, like
Verizon, that control the broadband Internet access networks on which DISH
depends. The Commission determined that “the competitive viability of
stand-alone [video distributors such as DISH] depends on their ability to offer

10 Because Congress expressly directed the Commission to adopt rules to
implement Section 628, 47 U.S.C. § 548(c)(1), the statute grants direct as well as ancillary authority. Order ¶129 (JA 71).
53 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 67 of 122
an online video experience of the same quality as the online video offerings
of integrated broadband providers.” Ibid., quoting DISH Reply Comments 7
(JA 837). The record also showed that broadband providers “view these
services as a … threat” to their video operations, Order ¶22 & n.54 (JA 13),
and can block competing Internet-based video distribution services. DISH
Comments 5-6 (JA 677-678); Public Knowledge Dec. 14, 2010, ex parte (JA
1087).
In such circumstances, the Open Internet Rules “further [the agency’s]
mandate under Section 628.” Order ¶131 (JA 73). By interfering with the
strategies of competing video distributors, which depend increasingly on
Internet-based distribution, see id., a broadband access provider’s blocking or
degradation would “hinder or prevent” those companies from providing
programming to subscribers. That outcome would “frustrate Congress’s
stated goals” in enacting Section 628, which include “promoting
competition,” increasing the availability of programming “to persons in rural
and other areas not currently able to receive such programming,” and
“spurring the development of communications technologies.” Id. ¶129 (JA
71-72). This Court has similarly recognized that reducing the “commercial
attractiveness” of programming can amount to a “significant[] hind[rance]”
under Section 628. Cablevision, 649 F.3d at 708.
54 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 68 of 122
Independently, Section 616, 47 U.S.C. § 536, requires the Commission
to “establish regulations governing program carriage agreements and related
practices between cable operators … and video programming vendors” to
protect competition in the video distribution marketplace. 47 U.S.C.
§ 536(a). Among the required regulations are those that prevent a video
distributor from “engaging in … unreasonabl[e] restrain[t] [of] the ability of
an unaffiliated video programming vendor to compete fairly by
discriminating … on the basis of affiliation or nonaffiliation.” 47 U.S.C.
§ 536(a)(3). The Commission explained that video distributor practices “that
discriminatorily impede competing video programming vendors’ online
delivery of programming to consumers affect the vendors’ ability to ‘compete
fairly’ for viewers just as surely as [video distributors’] discriminatory
selection of video programming for carriage on cable systems has this effect.” Order ¶132 (JA 74). Such practices are “related” to program carriage
agreements, the Commission found, and thus within the scope of Section
616(a). Ibid.
Verizon provides only a cursory response. Its principal argument is
that Sections 628 and 616 apply only to “cable operators” (such as Verizon in
its FiOS business) and thus supply authority only insofar as a cable operator
55 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 69 of 122
is acting in its capacity as a video distributor and not when it is acting as a
broadband provider. Br. 36.
Verizon reads these statutes too narrowly. This Court has previously
found that Section 628 applies to terrestrial programmers – which are not
expressly addressed by the statute – when they withhold programming from a
competing video provider in order to benefit a commonly controlled cable
service provider. See Cablevision, 649 F.3d at 719. The same logic applies
here. Regardless of corporate organization, when a broadband provider
blocks Internet-based competition in order to protect the profitability of its
affiliated cable business, it is acting for the benefit of the cable system.
Verizon also contends that Sections 628 and 616 do not supply
ancillary authority because the Open Internet Rules are not “necessary” to
further their purposes. Br. 37. But as described above, the Commission
found, and Verizon does not challenge, that Internet-based distribution is
becoming essential to the success of video distributors and programming
vendors and that cable companies have both the incentive and ability to
interfere with competition from these new rivals. The Commission
reasonably concluded on that record that the congressional policy behind
Sections 628 and 616 could be frustrated in the absence of protective rules.
Its predictive judgments are entitled to deference.
56 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 70 of 122
It is not enough, as Verizon wrongly contends, that “the FCC can
address directly” any incidents of blocking. Br. 37. We refuted an
analogous claim as to Title II at page 52, supra. Moreover, the Commission
should not be forced to play cat-and-mouse with broadband providers, whose
customers may not even know that their access to a website is being blocked
or degraded. As to the argument that no cable-based broadband provider has
been found interfering with competition, Br. 37, Verizon’s own brief
confirms that this is a live issue when it objects to the duty to “carry the
traffic of all ‘edge providers,’” Br. 2. In any event, the Supreme Court has
explained that the Commission may “plan in advance of foreseeable events,
instead of waiting to react to them.” Southwestern Cable, 392 U.S. at 176-
177. 2. Title III.
Under Title III of the Communications Act, the Commission has
authority to make rules that are necessary to ensure the “orderly development
… of local television broadcasting,” Southwest Cable, 392 U.S. at 177, and
the “more effective use” of the radio spectrum, 47 U.S.C. § 303(g). The
Commission determined that “Internet video distribution is increasingly
important to … local television broadcast service.” Order ¶128 (JA 71). For
example, local television and radio stations “now provide news and other
57 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 71 of 122
information online via their own websites” and other websites such as Hulu. Id. ¶16 (JA 8). Thus, the Commission explained, “online distribution has a
strategic value for broadcasters,” which, the agency predicted, “is likely to
provide an increasingly important source of funding for broadcast news and
entertainment programming.” Ibid.
Broadband providers offer video services and have the incentive and
ability to interfere with broadcasters’ delivery of competing video
programming. Order ¶¶21-23 & n.60 (JA 11-15). In the absence of the Open
Internet Rules, such interference could “jeopardize broadcasters’ ability to
offer … programming over the Internet” and would “threaten to impair
[broadcasters’] ability to offer high-quality broadcast content.” Id. ¶128 (JA
71).
Thus, the Open Internet Rules are within the Commission’s authority to
regulate over-the-air broadcasting under Title III in the same way that cable
television regulation was within the Commission’s authority in Southwestern Cable, 392 U.S. at 177.
The Commission explicitly relied on this theory in Paragraph 128 of
the Order,but Verizon does not respond to it and thus has waived any
objection. Notably, NCTA, which represents cable operators that are among
the largest broadband providers in the country, argued that the Commission
58 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 72 of 122
had authority to adopt the Open Internet Rules on that ground. NCTA Dec.
10, 2010, ex parte at 3 (JA 1052).

C. The Transparency Rule Is Supported By Statutory

Reporting Responsibilities.

The transparency rule is separately supported by the Commission’s
responsibility to provide a variety of reports to Congress. Specifically,
Congress directed the Commission to report triennially on “market entry
barriers” in services including information services. 47 U.S.C. § 257; see
11Order n.444 (JA 76). Similarly, “to perform the duties and carry out the
objects for which it was created” the Commission may “inquire into the
management of the business” of any common carrier and its affiliates. 47
U.S.C. § 218. That provision allows the Commission “to require the
provision of information such as that covered by the transparency rule.” Order ¶137 (JA 77).
In Comcast, this Court “readily accepted” that “disclosure
requirements” like the transparency rules “could be ‘reasonably ancillary’ to
the Commission’s statutory responsibility to issue a report to Congress.” 600
F.3d at 659. The transparency rule fits that description. Order ¶136 (JA 76-
77).

11 We do not rely on 47 U.S.C. § 154(k) in light of Pub. L. No. 104-66,
Title III, § 3003, 109 Stat. 707, 734 (Dec. 21, 1995).
59 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 73 of 122
Verizon responds that “the transparency rule does not relate to any
actual reporting or information collection requirement” but serves only “to
advance the FCC’s ‘openness policies.” Br. 42. Verizon does not appear to
have raised that claim before the agency, so it is now barred by 47 U.S.C.
§ 405(a). In any event, the transparency requirement both allows end users
access to information and allows the Commission to fulfill its statutory
reporting duties (which may well be informed by public input based on
information disclosed by broadband providers).

III. THE COMMISSION PROPERLY DETERMINED THAT

THE OPEN INTERNET RULES DO NOT TREAT BROADBAND PROVIDERS AS COMMON CARRIERS.

Verizon argues that the Open Internet Rules unlawfully treat broadband
providers as common carriers. Verizon’s claim is that, by forbidding access
providers from blocking or charging edge providers, the Commission has
required access providers to “carry” Internet programming for edge providers.
Br. 16-17. That claim misstates both the nature of Internet access service and
the Open Internet Rules. It has no basis in the Communications Act or
decisions interpreting the term “common carrier.”
After the Order, as before, Verizon is free to offer or decline to sell
broadband Internet access service to any end user. Verizon need not hold
itself out to offer service indifferently to anyone. The only things that
60 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 74 of 122
Verizon (and other broadband Internet access providers) cannot do are
blocking its end users from reaching lawful content and charging edge
providers to allow end users to reach them. See Order ¶24 (JA 15). Verizon
claims, at least sometimes, that it has not done those things and does not
intend to do them. E.g. Br. 51.
In any event, the Commission properly concluded, in accord with the
text of the Communications Act and court precedent, that, as long as Verizon
is not required to serve end users indiscriminately, rules regarding blocking
or charging edge providers do not create common carriage. The Commission
has decades of experience with the concept of common carriage, and courts
have recognized its discretion to interpret and apply common-carriage status
under the Communications Act. See USTA v. FCC, 295 F.3d 1326, 1332
(D.C. Cir. 2002); Howard v. America Online Inc., 208 F.3d 741, 752-753 (9th
12
Cir. 2000). The Commission acted well within that discretion here.
1. A common carrier relationship is established when a customer
requests service offered by the carrier. Under the Communications Act, it is

12 Verizon asserts that the Commission is not entitled to discretion in its
interpretation of common carriage. Br. 14 n.4 (citing NARUC v. FCC, 525 F.2d 630, 644 (D.C. Cir. 1976)). Verizon fails to distinguish the more recent contrary decisions. Furthermore, in NARUC the Court rejected only “unfettered discretion in the Commission” as to common carrier status, not ordinary Chevron deference. 525 F.2d at 644 (emphasis added).
61 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 75 of 122
“the duty of every common carrier … to furnish … communication service upon reasonable request therefor.” 47 U.S.C. § 201(a) (emphasis added).
Similarly, the Act defines a “common carrier” as a carrier available “for hire”
by a person requesting service. 47 U.S.C. § 153(11); see also id. § 153(53)
(defining a “telecommunications service,” which is a common carrier service,
as the offering of service “for a fee”).
Thus, as the Commission explained, the relevant customers are “the
end users who subscribe to broadband Internet access services” – the entities
that “request” service – and not edge providers. Order ¶79 (JA 47). That
determination follows from the structure of the Internet and the text of the
Communications Act. Broadband Internet access service allows an end-user subscriber – who pays for broadband access service – to “transmit data to and
receive data from all or substantially all Internet endpoints.” Order ¶44 (JA
13
28). Indeed, an edge provider has no direct relationship with the end user’s
access provider (Verizon, in this case) and typically does not know the access

13 When an end user navigates to a website, he sends a request to his access
provider (e.g., by entering the site address or clicking on a link) to retrieve data from the requested site. The access provider transports the request to the Internet “backbone,” transit networks operated by third parties. The backbone providers in turn transmit the request to the access provider to which the edge provider subscribes. The edge provider then transmits the requested data (for example, a web page, blog post, or application data) back to the end user through the reverse process. See generallyhttp://computer.howstuffworks.com/internet/basics/internet.htm.
62 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 76 of 122
provider’s identity. As described in note 13, end users and edge providers
have independent subscriber relationships with their own access providers,
with typically at least one (and sometimes many) third-party backbone
networks between them. As the Commission pointed out, the Open Internet
Rules “become effective only after … a provider has voluntarily entered into
a[n] … arrangement with the end user” that allows him to reach the content of
his choice. Id. ¶79 (JA 47). An edge provider does not “request” service
from or seek to “hire” Verizon.
This Court’s decisions are consistent with that analysis. The Court has
recognized “that to be a common carrier one must hold oneself out
indiscriminately to the clientele one is suited to serve.” NARUC v. FCC, 525
F.2d 630, 641 (D.C. Cir. 1976) (emphasis added); see also Southwestern Bell Tel. Co. v. FCC, 19 F.3d 1475, 1481 (D.C. Cir. 1994) (where a carrier
“chooses its clients on an individual basis” it is not a common carrier). In
other words, common carriage is a relationship between a carrier and its
customers, not between a carrier and another entity that has never requested
services from that carrier.
Verizon relies on FCC v. Midwest Video Corp., 440 U.S. 689 (1979)
(Midwest II),a cable carriage case, but that case supports the Commission’s
position, not Verizon’s. The differences between the rules at issue there and
63 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 77 of 122
those at issue here illustrate why the Open Internet Rules do not impose a
common carriage requirement on broadband access providers.
The Midwest II rules required cable operators to “hold out dedicated
channels,” occupying up to 20 percent of the system’s total capacity, for use
“on a first-come, nondiscriminatory basis” by any programmer that requested
carriage from the cable operator. 440 U.S. at 692-693, 701-702. Moreover,
given the nature of cable television systems at the time, carrying unwanted
programming on reserved channels prevented the cable operator from
offering its subscribers other channels of the operator’s choosing. Carriage of
one program would thus “restrict expansion of other cable services” and
“interfere with … the [cable provider’s] total service offering” on its finite
channels. Id. at 707 n.17. The Commission’s rules there “transferred control
of the content of access cable channels from cable operators to
[programmers] who wish to communicate by the cable medium.” 440 U.S. at
700.
The circumstances here are entirely different. Unlike the programmers
in Midwest II, edge providers are not “requesting” any access from Verizon.
Rather, their content is delivered only at the request of an end user who is
Verizon’s customer. In the absence of the customer’s request for its content,
the edge provider has no right to delivery. Nor do edge providers use a
64 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 78 of 122
“dedicated channel” that is assigned on a “first-come” basis at their request.
And, unlike in Midwest II, connecting an end user to an edge provider over
the Internet does not by itself preclude connecting any other customer to the
content of his choice. See Order n.246 (Open Internet Rules do not “requir[e]
a broadband provider to ‘hold out’ any capacity for the exclusive use of third
parties or make a public offering of its service”) (JA 46).
There is also no “transferred control” here, because, as Verizon
acknowledges, see Br. 43, 51, and unlike cable systems, Internet access
providers traditionally have not decided what sites their end users visit. That
is fundamentally different from Midwest II, where the Court emphasized that
the requirement to hold out dedicated channels on a first-come, first served
basis, see 440 U.S. at 701, 706 n.16, significantly impinged on the “editorial
discretion” that cable operators had exercised in choosing their channel
lineup. Id. at 707; see id. at 706-09 & n.15.
Verizon’s reliance (Br. 18) on Vitelco v. FCC, 198 F.3d 921, 930 (D.C.
Cir. 1999), is misplaced. There, a provider of submarine cable telephone
service entered into customer relationships with a number of other carriers,
who then resold the service to their own customers, the end users of the
service. In affirming the FCC’s determination that the initial sale of service
did not constitute common carriage, the Court recognized that a carrier need
65 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 79 of 122
not sell service directly to the ultimate “end user” of the service in order to be
deemed a common carrier. The Court neither held nor suggested, however,
that a common carriage relationship could exist with a party that did not
14
request service.
Despite Verizon’s repeated claims (Br. 15-17), the Open Internet Rules
do not set compensation for delivery of traffic at zero. Rather, broadband
providers set their own prices for service and may charge different rates to
different end-user customers (or decide not to serve certain end users). Edge
providers similarly pay for their connections to the network under whatever
prices, terms, and conditions their broadband provider wishes to charge. See Order ¶24 (JA 15). Verizon may wish to collect a second fee each time one
of its customers seeks to visit a website connected to the Internet by a
different access provider, but its inability to impose such a charge does not
make its service free.
Finally, Verizon does not demonstrate why the Order’s
nondiscrimination requirement (or the anti-blocking rule, which is the only
restriction on mobile wireless providers) transforms providers into common
carriers. The Communications Act imposes non-discrimination requirements

14 Iowa Telecomms. Servs. v. Iowa Utils. Bd., 563 F.3d 743 (8th Cir. 2009),
considered similar issues and is irrelevant for the same reason.
66 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 80 of 122
on many entities that are not common carriers. See, e.g.,47 U.S.C. § 315(b)
(requiring that broadcast stations charge political candidates non-
discriminatory lowest-unit rates); 47 U.S.C. §548(c)(2)(B) (prohibiting
discrimination by satellite cable programming vendors). In this regard,
Verizon contends briefly (Br. 20-21) that even if the Open Internet rules do
not create common-carriage relationships, they impermissibly impose
requirements that are similar to Title II obligations. The statute, however,
prohibits treatment “as a common carrier,” see 47 U.S.C. §§ 153(51),
332(c)(2), and Verizon points to nothing in the statutory text that prohibits
rules that share some characteristics of Title II obligations but do not create
common carriage per se. See Order n.250 (JA 47).
In any event, the Open Internet Rules do not “replicate key aspects of
Title II” (Br. 20), and whether any given requirement constitutes common
carriage is a matter for Commission discretion in the first instance. Indeed, if
Verizon’s broad assertions as to the scope of common carriage were correct,
the Supreme Court would have struck down the rules challenged in Southwestern Cable, which required cable systems to carry, upon request, the
signals of local broadcast stations. 392 U.S. at 177. The Court confirmed in Midwest II, however, that those rules were permissible because they did not
67 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 81 of 122
create “a duty to hold out facilities indifferently for public use.” 440 U.S. at
706 n.16.
2. Even if the Open Internet Rules could be construed as imposing a
common-carriage obligation, they still would not violate Sections 153(51)
and 332(c)(2) of the Communications Act. Those provisions prohibit
common-carriage treatment of information service providers only “under this
[Act]” – i.e., the Communications Act of 1934, as amended. 47 U.S.C.
§§ 153(51) & 332(c)(2). As explained above, the Commission has sufficient
authority to adopt the rules under Section 706 alone, without relying on any
other authority. Section 706 is not part of the Communications Act of 1934
and thus not subject to the statutory limitations on common-carrier treatment. See Order n.248 (JA 46). Notably, not all Communications Act provisions
barring common-carriage treatment are limited to treatment under “this Act.” See 47 U.S.C. § 153(11) (no common carriage for broadcasters); see also 47
U.S.C. § 541(c).

IV.

THE OPEN INTERNET RULES ARE CONSISTENT WITH THE FIRST AND FIFTH AMENDMENTS.

A. First Amendment.

Verizon asserts that the Open Internet Rules violate the First
Amendment because they “limit broadband providers’ own speech and
compel carriage of others’ speech.” Br. 43. That claim fails.
68 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 82 of 122
1. The Commission correctly determined that broadband providers are
not “speakers” at all, but only “conduits for speech” of others and that the
Open Internet Rules therefore do not implicate the First Amendment. Order
¶141 (JA 78). End users purchase service so that “they can obtain access to
all or substantially all content that is available on the Internet,” without
editorial selection by the service provider. Ibid. Verizon admits as much
when it argues that “broadband providers today generally provide subscribers
access to all lawful [Internet] content.” Br. 51.
In fact, as the Commission pointed out, broadband providers obtain
immunity from copyright violations and other liability for material distributed
on their networks on the very ground that “they lack control over what end
users transmit and receive.” Order ¶142 & n.456 (JA 78). Thus, Verizon
argued – and this Court agreed – that it is not subject to subpoena in a
copyright infringement case because as a broadband provider it “act[s] as a
mere conduit for the transmission of information sent by others.” Recording Indus. Ass’n v. Verizon Internet Servs., Inc., 351 F.3d 1229, 1237 (D.C. Cir.
2003); see also Charter Communications, Inc., 393 F.3d 771, 777 (8th Cir.
69 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 83 of 122
2005) (no subpoena because broadband provider is “limited to acting as a
15
conduit”).
That should be the end of the matter. In that regard, this case is similar
to Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S.
47 (2006) (FAIR). There, a statute compelled law schools to grant military
recruiters access to the schools’ job recruiting facilities. The schools claimed
that the requirement amounted to compelled speech. The Court unanimously
rejected the claim. The requirement, it ruled, “regulates conduct, not speech.
It affects what law schools must do – afford equal access to military recruiters
– not what they may or may not say.” Id. at 60.
That was so, the Court held, because:
schools are not speaking when they host interviews and recruiting receptions.… A law school’s recruiting services lack the expressive quality of a parade, a newsletter, or the editorial page of a newspaper; its accommodation of a military recruiter’s message is not compelled speech because the accommodation does not sufficiently interfere with any message of the school.

15 Seealso 47 U.S.C. § 230(c)(1) (“[n]o provider … of an interactive
computer service shall be treated as the publisher or speaker of any information provided” over its system); 17 U.S.C. § 512(a) (exempting broadband providers from liability “for infringement of copyright by reason of the provider’s transmitting, routing, or providing connections” on their networks).
70 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 84 of 122
547 U.S. at 64. As in that case, Verizon has articulated no plausible claim of
expressive activity in providing its end users access to their chosen Internet
content. By delivering the information requested by its customers, Verizon is
no different from a messenger delivering documents that contain speech. See
Stuart Minor Benjamin, Transmitting, Editing, And Communicating: Determining What “The Freedom Of Speech” Encompasses, 60 Duke L.J.
1673, 1685 (2011).
Moreover, the Open Internet requirements do not amount to compelled
speech because they do not “interfere with any message” of the service
provider. FAIR, 547 U.S. at 63. Verizon remains free to convey any content
it wishes on its facilities, just as law schools “remain[ed] free … to express
whatever views they may have on the military[].” Id. at 60. To the extent
Verizon wishes to exercise editorial discretion, it may host its own website on
which it may disseminate any content of its choice. Moreover, the Open
Internet Rules apply only to “broadband Internet access service,” which the
Commission defined to mean a service that enables user access to all Internet
endpoints. Order ¶44 (JA 28). Verizon is free to provide to its customers “a
wide range of ‘edited’ services,” such as “Best of the Web,” that reflect
Verizon’s selection of Internet content. Id. ¶47 (JA 29). It may also offer
71 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 85 of 122
Specialized Services such as “Internet Protocol-video offerings” that also
reflect Verizon’s editorial judgments. Id. ¶¶112, 143 (JA 61, 79).
The
same
reasoning
distinguishes Turner Broadcasting System Inc. v. FCC, 512 U.S. 622 (1994). The Court determined there that cable television
operators have First Amendment rights because they “engage in and transmit
speech” through “original programming or by exercising editorial discretion
over which stations or programs to include in [their] repertoire.” Id. at 636
(quotation marks omitted). Thus, cable operators “see[k] to communicate
messages on a wide variety of topics and in a wide variety of formats” and
“exercis[e] editorial discretion over which stations or programs to include” in
their channel lineup. Id. at 636 (quotation marks omitted). Verizon has
provided no basis to believe that it performs a similar function.
Moreover, the must-carry rules “reduce[d] the number of channels over
which cable operators exercise[d]” control and “render[ed] it more difficult
for cable programmers to compete for carriage on the limited channels
remaining.” Turner, 512 U.S. at 637. No such circumstances exist here. As
described at pages 63-65 above, Internet access does not function like a cable
system.
Verizon never comes to terms with its self-described role as a mere
conduit for others’ speech or with its own characterization of that function
72 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 86 of 122
(on which this Court has relied) in copyright cases. It asserts, without
foundation, that it acts “just as a newspaper” does, Br. 43, but that description
cannot be reconciled with the reality of Internet access service, which, as the
Commission found, “does not involve an exercise of editorial discretion.” Order ¶141 (JA 78).

Verizon suggests that it would like to be able to “give differential
pricing or priority access” to its own revenue-generating services, Br. 44, and
to engage in “two sided pricing models” by charging edge providers, Br. 17.
Those financial concerns do not transform Verizon into a speaker under the
First Amendment and would “trivializ[e] the freedom protected” under the
Constitution. FAIR, 547 U.S. at 62.

2. If the Court were to conclude that the First Amendment applies
here, the Open Internet Rules satisfy intermediate scrutiny. Under that
standard, a content-neutral restriction on speech will be upheld if it “furthers
an important or substantial government interest” and if “the means chosen” to
achieve that interest “do not burden substantially more speech than is
necessary.” Turner, 512 U.S. at 662 (citations omitted).

The government has at least three substantial interests in preserving the
openness of the Internet. First, openness drives infrastructure investment,
which fulfills numerous policies that benefit the public. See pp. 37-43, supra.
73 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 87 of 122
Verizon itself has opined that “the minute that anyone, whether from the
government or the private sector, starts to control how people access and use
the Internet, it is the beginning of the end of the Net as we know it.” Verizon
Jan.14, 2010, ex parte at 7 (JA 756).
Second, as also discussed above, the Open Internet Rules protect
competition both among edge providers and between edge providers and
access providers. Protecting consumers through market forces is plainly an
important government interest. Turner, 512 U.S. 662-663.
Third, the Open Internet Rules protect the ability of all Internet users to
receive all content of their choice and to share that content with others
through YouTube or a letter to the editor, thus “assuring that the public has
access to a multiplicity of information sources,” which “is a governmental
purpose of the highest order.” Turner, 512 U.S. at 663.
Balanced against those important governmental interests is the minimal
effect (if any) on speech imposed by the Open Internet Rules. The rules do
not “burden substantially more speech than necessary” because they do not
burden any identifiable speech (and, even if all of Verizon’s arguments were
accepted, the rules would still barely burden speech). Verizon remains free to
provide any information it chooses to its customers and other Internet users,
74 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 88 of 122
and it also may offer edited access services in which Verizon selects the
content available to end users.

Verizon argues that the threat to Internet openness is speculative (Br.
46-47), but the Commission determined that broadband providers have the
incentive and ability to block and degrade traffic and have done so. See pp.
13-15, supra.

Finally, after arguing that the Open Internet Rules are unconstitutional
because they sweep too broadly, Verizon fleetingly claims (Br. 48) that the
rules are unconstitutionally underinclusive. But this case is nothing like City of Ladue v. Gilleo, 512 U.S. 43 (1994), on which Verizon relies. That case
involved differential regulation of signage, and the Court explained that “an
exemption from an otherwise permissible regulation of speech may represent
a governmental attempt to give one side of a debatable public question an
advantage in expressing its views to the people.” Id. at 51 (citation omitted).
Verizon does not argue that any such concern exists here, nor does it provide
evidence establishing that other parties are similarly situated to broadband
Internet access providers that transmit content.

B. Fifth Amendment.

1. Verizon argues (Br. 49) that the Open Internet rule prohibiting
blocking amounts to a “permanent physical occupation” of broadband
75 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 89 of 122
providers’ property without compensation in violation of the Takings Clause. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 441 (1982).
But there is compensation here: Verizon gets paid for carrying traffic at
whatever rate it chooses to charge its end users, and it need not serve any end
user it wishes not to.
If the Fifth Amendment is implicated at all, Verizon’s recourse is a
compensation complaint in the Court of Federal Claims. See Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172, 194-
195 (1985); Building Ownersv. FCC, 254 F.3d 89, 101 (2001) (Randolph, J.,
concurring).
In any event, transmission of Internet packets does not amount to
“permanent physical occupation.” Indeed, the only appellate court to have
considered the issue held that “electrons or photons [travelling] at the speed
of light” through an owner’s network “does not involve a physical
occupation” of property. Cablevision Systems Corp. v. FCC, 570 F.3d 83, 98
(2nd Cir. 2009).
Verizon also claims that the Open Internet Rules constitute a regulatory
taking. Br. 49. Again, however, Verizon is paid for the use of its network at
whatever rate it establishes. Verizon thus has failed to show the “deprivation
76 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 90 of 122
of all or most economic use” required to state a claim of regulatory taking. Full Value Advisors, LLC v. SEC, 633 F.3d 1101, 1109 (D.C. Cir. 2011).

V.

THE OPEN INTERNET RULES ARE BASED ON SUBSTANTIAL EVIDENCE.

Verizon argues briefly that the Open Internet Rules are arbitrary and
capricious. Br. 50-52. The gist of the claim is that the record “fails to evince
any problem sufficient to justify the rules.” Br. 51.
The Commission determined that broadband providers have economic
incentives to reduce Internet openness. Order ¶¶21-34 (JA 11-21). They also
have the technical capability to do so – and have interfered with Internet
transmissions in the past. See pp. 12-15, supra. The Commission indicated
that the number of blocking incidents would have been even higher were it
not for the deterrent effect of the Internet Policy Statement and several
merger conditions requiring adherence to its policies. Id. ¶37 & nn.116-118
(JA 22-23). It is of course impossible to “predict with certainty” the future
course of a regulated market, but the Commission may “plan in advance of
foreseeable events, instead of waiting to react to them.” Southwestern Cable,
392 U.S. at 176-177. That is especially so when the “harms of open Internet
violations”– such as preventing development of the next Facebook or other
world-changing application – “may be substantial, costly, and in some cases
potentially irreversible.” Order ¶4 (JA 3).
77 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 91 of 122
Finally, Verizon makes token arguments that the rules unfairly
discriminate among similarly situated parties and that the FCC departed from
a prior “deregulatory framework for broadband.” Br. 52. Those passing
mentions do not preserve the claims, seeRailway Labor Executives’ Ass’n v. U.S. R.R. Retirement Bd., 749 F.2d 856, 859 n.6 (D.C. Cir. 1984). They are
wrong in any event. On the first point, Verizon does not attempt to show that
the other “players” are situated similarly to companies that provide – and
control – Internet access. On the second, the FCC has never established an
exclusively deregulatory framework, see, e.g., Ad Hoc, 572 F.3d at 906-907,
but has set policies to fit the situations before it. The Open Internet Rules
adopt the minimum necessary restrictions to address the problems disclosed
by the comprehensive record before the Commission.
78 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 92 of 122

CONCLUSION

The notices of appeal should be dismissed and the petitions for review
should be denied.
Respectfully
submitted,
WILLIAM J. BAER
SEAN A. LEV
ASSISTANT ATTORNEY GENERAL
GENERAL COUNSEL

For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communications, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the “Federal Communications Commission”, which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this chapter.

(a) The provisions of this chapter shall apply to all interstate and foreign communication by wire or radio and all interstate and foreign transmission of energy by radio, which originates and/or is received within the United States, and to all persons engaged within the United States in such communication or such transmission of energy by radio, and to the licensing and regulating of all radio stations as hereinafter provided; but it shall not apply to persons engaged in wire or radio communication or transmission in the Canal Zone, or to wire or radio communication or transmission wholly within the Canal Zone. The provisions of this chapter shall apply with respect to cable service, to all persons engaged within the United States in providing such service, and to the facilities of cable operators which relate to such service, as provided in subchapter V-A.

The term “common carrier” or “carrier” means any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or interstate or foreign radio transmission of energy, except where reference is made to common carriers not subject to this chapter; but a person engaged in radio broadcasting shall not, insofar as such person is so engaged, be deemed a common carrier.

(24) Information service

The term “information service” means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

(53) Telecommunications service

The term “telecommunications service” means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.

(a) It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor; and, in accordance with the orders of the Commission, in cases where the Commission, after opportunity for hearing, finds such action necessary or desirable in the public interest, to establish physical connections with other carriers, to establish through routes and charges applicable thereto and the divisions of such charges, and to establish and provide facilities and regulations for operating such through routes.

(b) All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful: Provided, That communications by wire or radio subject to this chapter may be classified into day, night, repeated, unrepeated, letter, commercial, press, Government, and such other classes as the Commission may decide to be just and reasonable, and different charges may be made for the different classes of communications: Provided further, That nothing in this chapter or in any other provision of law shall be construed to prevent a common carrier subject to this chapter from entering into or operating under any contract with any common carrier not subject to this chapter, for the exchange of their services, if the Commission is of the opinion that such contract is not contrary to the public interest: Provided further, That nothing in this chapter or in any other provision of law shall prevent a common carrier subject to this chapter from furnishing reports of positions of ships at sea to newspapers of general circulation, either at a nominal charge or without charge, provided the name of such common carrier is displayed along with such ship position reports. The Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this chapter.

The Commission may inquire into the management of the business of all carriers subject to this chapter, and shall keep itself informed as to the manner and method in which the same is conducted and as to technical developments and improvements in wire and radio communication and radio transmission of energy to the end that the benefits of new inventions and developments may be made available to the people of the United States. The Commission may obtain from such carriers and from persons directly or indirectly controlling or controlled by, or under direct or indirect common control with, such carriers full and complete information necessary to enable the Commission to perform the duties and carry out the objects for which it was created.

The Congress finds the following: (1) The rapidly developing array of Internet and other interactive computer services available to individual Americans represent an extraordinary advance in the availability of educational and informational resources to our citizens. (2) These services offer users a great degree of control over the information that they receive, as well as the potential for even greater control in the future as technology develops. (3) The Internet and other interactive computer services offer a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity. (4) The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation. (5) Increasingly Americans are relying on interactive media for a variety of political, educational, cultural, and entertainment services.

(b) Policy

It is the policy of the United States-- (1) to promote the continued development of the Internet and other interactive computer services and other interactive media; (2) to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation;

(3) to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet and other interactive computer services; (4) to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children's access to objectionable or inappropriate online material; and (5) to ensure vigorous enforcement of Federal criminal laws to deter and punish trafficking in obscenity, stalking, and harassment by means of computer.

It is the purpose of this chapter, among other things, to maintain the control of the United States over all the channels of radio transmission; and to provide for the use of such channels, but not the ownership thereof, by persons for limited periods of time, under licenses granted by Federal authority, and no such license shall be construed to create any right, beyond the terms, conditions, and periods of the license. No person shall use or operate any apparatus for the transmission of energy or communications or signals by radio (a) from one place in any State, Territory, or possession of the United States or in the District of Columbia to another place in the same State, Territory, possession, or District; or (b) from any State, Territory, or possession of the United States, or from the District of Columbia to any other State, Territory, or possession of the United States; or (c) from any place in any State, Territory, or possession of the United States, or in the District of Columbia, to any place in any foreign country or to any vessel; or (d) within any State when the effects of such use extend beyond the borders of said State, or when interference is caused by such use or operation with the transmission of such energy, communications, or signals from within said State to any place beyond its borders, or from any place beyond its borders to any place within said State, or with the transmission or reception of such energy, communications, or signals from and/or to places beyond the borders of said State; or (e) upon any vessel or aircraft of the United States (except as provided in section 303(t) of this title); or (f) upon any other mobile stations within the jurisdiction of the United States, except under and in accordance with this chapter and with a license in that behalf granted under the provisions of this chapter.

Except as otherwise provided in this chapter, the Commission from time to time, as public convenience, interest, or necessity requires, shall-- (a) Classify radio stations; (b) Prescribe the nature of the service to be rendered by each class of licensed stations and each station within any class;

(g) Study new uses for radio, provide for experimental uses of frequencies, and generally encourage the larger and more effective use of radio in the public interest

(r) Make such rules and regulations and prescribe such restrictions and conditions, not inconsistent with law, as may be necessary to carry out the provisions of this chapter, or any international radio or wire communications treaty or convention, or regulations annexed thereto, including any treaty or convention insofar as it relates to the use of radio, to which the United States is or may hereafter become a party USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 105 of 122
47 U.S.C. § 307

§ 307. Licenses

(a) Grant

The Commission, if public convenience, interest, or necessity will be served thereby, subject to the limitations of this chapter, shall grant to any applicant therefor a station license provided for by this chapter

§ 316. Modification by Commission of station licenses or construction permits; burden of proof

(a)(1) Any station license or construction permit may be modified by the Commission either for a limited time or for the duration of the term thereof, if in the judgment of the Commission such action will promote the public interest, convenience, and necessity, or the provisions of this chapter or of any treaty ratified by the United States will be more fully complied with. No such order of modification shall become final until the holder of the license or permit shall have been notified in writing of the proposed action and the grounds and reasons therefor, and shall be given reasonable opportunity, of at least thirty days, to protest such proposed order of modification; except that, where safety of life or property is involved, the Commission may by order provide, for a shorter period of notice. (2) Any other licensee or permittee who believes its license or permit would be modified by the proposed action may also protest the proposed action before its effective date. (3) A protest filed pursuant to this subsection shall be subject to the requirements of section 309 of this title for petitions to deny. (b) In any case where a hearing is conducted pursuant to the provisions of this section, both the burden of proceeding with the introduction of evidence and the burden of proof shall be upon the Commission; except that, with respect to any issue that addresses the question of whether the proposed action would modify the license or permit of a person described in subsection (a)(2) of this section, such burdens shall be as determined by the Commission.

Within one year after October 5, 1992, the Commission shall establish regulations governing program carriage agreements and related practices between cable operators or other multichannel video programming distributors and video programming vendors. Such regulations shall-- (1) include provisions designed to prevent a cable operator or other multichannel video programming distributor from requiring a financial interest in a program service as a condition for carriage on one or more of such operator's systems; (2) include provisions designed to prohibit a cable operator or other multichannel video programming distributor from coercing a video programming vendor to provide, and from retaliating against such a vendor for failing to provide, exclusive rights against other multichannel video programming distributors as a condition of carriage on a system; (3) contain provisions designed to prevent a multichannel video programming distributor from engaging in conduct the effect of which is to unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly by discriminating in video programming distribution on the basis of affiliation or nonaffiliation of vendors in the selection, terms, or conditions for carriage of video programming provided by such vendors; (4) provide for expedited review of any complaints made by a video programming vendor pursuant to this section; (5) provide for appropriate penalties and remedies for violations of this subsection, including carriage; and (6) provide penalties to be assessed against any person filing a frivolous complaint pursuant to this section.

§ 548. Development of competition and diversity in video programming distribution

(a) Purpose

The purpose of this section is to promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video programming market, to increase the availability of satellite cable programming and satellite broadcast programming to persons in rural and other areas not currently able to receive such programming, and to spur the development of communications technologies.

(b) Prohibition

It shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.

(c) Regulations required

(1) Proceeding required

Within 180 days after October 5, 1992, the Commission shall, in order to promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video programming market and the continuing development of communications technologies, prescribe regulations to specify particular conduct that is prohibited by subsection (b) of this section.

(A) establish effective safeguards to prevent a cable operator which has an attributable interest in a satellite cable programming vendor or a satellite broadcast programming vendor from unduly or improperly influencing the decision of such vendor to sell, or the prices, terms, and conditions of sale of, satellite cable programming or satellite broadcast programming to any unaffiliated multichannel video programming distributor; (B) prohibit discrimination by a satellite cable programming vendor in which a cable operator has an attributable interest or by a satellite broadcast programming vendor in the prices, terms, and conditions of sale or delivery of satellite cable programming or satellite broadcast programming among or between cable systems, cable operators, or other multichannel video programming distributors, or their agents or buying groups; except that such a satellite cable programming vendor in which a cable operator has an attributable interest or such a satellite broadcast programming vendor shall not be prohibited from-- (i) imposing reasonable requirements for creditworthiness, offering of service, and financial stability and standards regarding character and technical quality; (ii) establishing different prices, terms, and conditions to take into account actual and reasonable differences in the cost of creation, sale, delivery, or transmission of satellite cable programming or satellite broadcast programming; (iii) establishing different prices, terms, and conditions which take into account economies of scale, cost savings, or other direct and legitimate economic benefits reasonably attributable to the number of subscribers served by the distributor; or (iv) entering into an exclusive contract that is permitted under subparagraph (D); (C) prohibit practices, understandings, arrangements, and activities, including exclusive contracts for satellite cable programming or satellite broadcast programming between a cable operator and a satellite cable programming vendor or satellite broadcast programming vendor, that prevent a USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 111 of 122
47 U.S.C. § 548 (con’t)

multichannel video programming distributor from obtaining such programming from any satellite cable programming vendor in which a cable operator has an attributable interest or any satellite broadcast programming vendor in which a cable operator has an attributable interest for distribution to persons in areas not served by a cable operator as of October 5, 1992; and (D) with respect to distribution to persons in areas served by a cable operator, prohibit exclusive contracts for satellite cable programming or satellite broadcast programming between a cable operator and a satellite cable programming vendor in which a cable operator has an attributable interest or a satellite broadcast programming vendor in which a cable operator has an attributable interest, unless the Commission determines (in accordance with paragraph (4)) that such contract is in the public interest.

(3) Limitations

(A) Geographic limitations

Nothing in this section shall require any person who is engaged in the national or regional distribution of video programming to make such programming available in any geographic area beyond which such programming has been authorized or licensed for distribution.

(B) Applicability to satellite retransmissions

Nothing in this section shall apply (i) to the signal of any broadcast affiliate of a national television network or other television signal that is retransmitted by satellite but that is not satellite broadcast programming, or (ii) to any internal satellite communication of any broadcast network or cable network that is not satellite broadcast programming.

(4) Public interest determinations on exclusive contracts

In determining whether an exclusive contract is in the public interest for purposes of paragraph (2)(D), the Commission shall consider each of the following factors with respect to the effect of such contract on the distribution of video programming in areas that are served by a cable operator: USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 112 of 122
47 U.S.C. § 548 (con’t)

(A) the effect of such exclusive contract on the development of competition in local and national multichannel video programming distribution markets; (B) the effect of such exclusive contract on competition from multichannel video programming distribution technologies other than cable; (C) the effect of such exclusive contract on the attraction of capital investment in the production and distribution of new satellite cable programming; (D) the effect of such exclusive contract on diversity of programming in the multichannel video programming distribution market; and (E) the duration of the exclusive contract.

(5) Sunset provision

The prohibition required by paragraph (2)(D) shall cease to be effective 10 years after October 5, 1992, unless the Commission finds, in a proceeding conducted during the last year of such 10-year period, that such prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming.

The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

(b) Inquiry

The Commission shall, within 30 months after February 8, 1996, and annually thereafter, initiate a notice of inquiry concerning the availability of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) and shall complete the inquiry within 180 days after its initiation. In the inquiry, the Commission shall determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. If the Commission's determination is negative, it shall take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.

(c) Demographic information for unserved areas

As part of the inquiry required by subsection (b), the Commission shall compile a list of geographical areas that are not served by any provider of advanced telecommunications capability (as defined by subsection (d)(1) of this section) and to the extent that data from the Census Bureau is available, determine, for each such unserved area-- (1) the population; USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 114 of 122
47 U.S.C. § 1302 (con’t)

(2) the population density; and (3) the average per capita income.

(d) Definitions

For purposes of this subsection:

(1) Advanced telecommunications capability

The term “advanced telecommunications capability” is defined, without regard to any transmission media or technology, as high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.

(2) Elementary and secondary schools

The term “elementary and secondary schools” means elementary and secondary schools, as defined in section 7801 of Title 20.

A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

(a) Broadband Internet access service. A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this part.

(d) Reasonable network management. A network management practice is reasonable if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.

I, Joel Marcus hereby certify that on January 16, 2013, I electronically filed
the foregoing Brief for Respondents with the Clerk of the Court for the
United States Court of Appeals for the D.C. Circuit by using the CM/ECF
system. Participants in the case who are registered CM/ECF users will be
served by the CM/ECF system. Others, marked with an asterisk, will
receive service by mail unless another attorney for the same party is
receiving service through CM/ECF.

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